Consumer payments is a competitive business in India as deep-pocketed companies: Walmart (via PhonePe), Paytm and Amazon Pay India continue to bleed in order to gain or protect market share. This is evident from Amazon Pay’s losses which surpassed Rs 1,740 crore mark in FY22 amidst slower revenue growth as compared to the previous fiscal.
Amazon Pay India’s operating revenue grew 16.6% to Rs 2,000 crore in FY22 from Rs 1,716 crore in FY21, as per its annual financial statement (standalone) filed with the Registrar of Companies (RoC). The payment processing fee or commission fee was the only source of operating revenue for Amazon Pay India in FY22.
The company also made Rs 52.6 crore as other income [mostly from interest on fixed deposits and current investment] which pushed its total income to Rs 2,052 crore in FY22 as compared to Rs 1,769 crore in FY21.
On the expense side, advertising was the largest cost element for the company contributing 62.77% of overall costs. This cost increased 21% to Rs 2,381 crore in FY22 from Rs 1,976 crore in the previous fiscal year (FY21).
Payment processor charges were the second major cost centre for Amazon Pay which increased 5% to Rs 924 crore in FY22 from Rs 880 crore in FY21. Importantly, advertising and payment processor charges constitute 87% of the overall expenditure for the company.
Employee benefit expenses grew 14.3% to Rs 160 crore during FY22 while Amazon Pay India spent Rs 155 crore on legal and professional fees during FY22. Amazon Pay India added another Rs 106 crore as communication expenses in FY22 pushing the overall cost to Rs 3,793 crore in FY22 from Rs 3,285 crore in the previous fiscal year (FY21).
With a 15.5% surge in expenses, the company’s losses also grew 14.8% to Rs 1,741 crore in FY22 from Rs 1,516 crore in FY21. Meanwhile, cash outflow from operating activities also expanded 53.1% to Rs 2,111 crore in FY22. On a unit level, the company spent Rs 1.90 to earn a rupee of operating revenue during the fiscal year ending March 2022.
The high losses seem to leave limited scope for a sharp reduction, operating as the firm does in a policy environment that allows very little flexibility on charges. However, the very high share of expenses under advertising at almost 67% would seem to indicate potential for cutbacks, as and when the market stabilises, or all firms move in cohesion. But with a significant part of these expenses also serving as incentives to partners, it will not be easy to cut back sharply for Amazon Pay India. To that extent, the business will continue to move ahead on promise over profitability for the near future too.